Wednesday, October 28, 2020

$1 in taxes costs society more than $1

See Thank These Nobel Laureates for Your Cellphone: Economists Paul Milgrom and Richard Wilson get the prize for devising spectrum auctions by David R. Henderson. Excerpt:

"In its technical paper justifying the awards, the Nobel Committee points out a major problem with using taxes to fund government programs: taxation distorts. The term economists use is “deadweight loss,” a loss that is not offset by a gain to anyone. Economists have estimated that raising $1 in taxes doesn’t cost society only $1; it costs somewhere between $1.17 and $1.56. The extra 17 to 56 cents is deadweight loss. The committee notes that by auctioning off major electromagnetic assets, the federal government avoided having to tax as much."

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